Everyday life in Gaza is becoming impossible. Photograph: Majdi Fathi/NurPhoto/Corbis

I have been reporting from Gaza all week, and, amid the stream of dead and injured civilians wheeled on trolleys before me, frantic people gesturing in my face, and nights spent in an unlit city under bombardment, I've come to a conclusion I did not expect: Gaza "works".

What I mean is that, given resources, connections with the outside world, and time, this narrow political entity could function normally. With its smooth sand, blue sea and skies, it could even become a tourist destination. It already has a massive pool of trained and educated human capital – though, sadly, its most expert people are trauma surgeons. As it is, hotels stand deserted along the beachfront in Gaza City. Their embarrassed waiters struggle to boil coffee on single flames. The fishermen in the port sneak out maybe 20 yards in canoes, while hostilities are on, 100 yards in motor boats during the sporadic ceasefires.

Everyday life, even for those with money and friends in the west, is becoming impossible. Water queues form, petrol stations are empty. Equally unnerving, for the young, urbanised kids, the internet is sporadic. I met two women – educated professionals: the top floor of their apartment block had been demolished by an Israeli rocket. Now they, too, were in the world of queues, poor hygiene, homelessness. A decent handbag does not exempt you. The currency is the shekel, but the biggest concern is gold. Palestinians keep their wealth in gold and jewellery. Around 250,000 people have been displaced and moving into a packed and filthy school, to sleep alongside the donkeys of the poor, does not strike people with gold as any better than staying and waiting for the shells to hit.

Gaza works because of Gaza's people. Since Hamas took control in 2007, the place has been run by a group designated as terrorist, and under Islamic rule. Unable to rebuild after the Israeli invasion of 2008-9, they instead built tunnels – nobody knows how long – in which the military wing of Hamas, the Qassam Brigades, live, store their rockets and fight. The tunnels are also used to bring in the essential supplies that have been banned during the seven-year siege of Gaza.

Strangely, then, for much of the day, you see the place as it might be if Hamas did not exist. Non-Hamas police keep order; women without hijabs move around as freely as the women in full veil; doctors returned from Germany and Canada saw the shattered bones of youths who have lived and may die in this small strip of land. And two-thirds of the population skip and play and wrestle – for they are children.

When this war is over, nothing good will happen in Gaza until the seige and blockade are lifted. Indeed, with 40% of the urban area unlivable because of the destruction, there will be a massive humanitarian crisis for months. Solving that crisis is not just a matter for NGOs. The way it is solved will dictate whether Gaza can survive. UNRWA, the UN agency for refugees that has opened its clean, blue-and-white schools to a dirty, chaotic surge of displaced humanity, says Gaza is "on a precipice". The hospital I've just been in has 95 blast and bullet wounds to treat, with six intensive care beds.

Logic dictates that either aid flows inwards, on an unprecedented scale, or people will flow outwards – not tomorrow, but as the weeks roll by without sanitation or power. Palestinians fear that a humanitarian crisis will be used to move them permanently off the land captured by the Israelis, and ultimately into camps in Egypt.

I have been to Muslim countries where there is deep conservatism, low education and suspicion of the west. This is not one of them. I constantly meet highly educated people who speak English; cheerful and friendly people – which is amazing in itself, given the level of terror the night brings. The world is not so blessed with educated, resourceful people that it can afford to waste the lives of 1.8 million Palestinians behind the iron grilles and the concrete walls that delimit Gaza. I have lost track of how many times I've met a young guy, 18 or 19 years old, proud not to be a fighter, a militant, or a duck-and-dive artist on the street. When you ask what his job is, the common answer is "carpenter". Working with wood – not metal or computer code – is the limit of what the blockade has enabled the skilled manual worker here to achieve.

Faced with such hopelessness, naturally, many become resigned: "Living is the same as being dead" is a phrase you hear among young men. It is the perfect rationale for the nihilist military organisation some choose to join. But its opposite is the resourcefulness that rewires a house after its front has been blown off; that sits on the carpet making bread on a hot pan after a home has been reduced to dust.

There are only two economic routes for life to flow back into Gaza and, given the bitterness of this conflict, the route from Israel will not be the main one. Egypt holds the key to Gaza's economic integration to the rest of the global economy. Open the Rafah crossing, and the need for the tunnels disappears. To the world this forlorn, impoverished and totally battered society has become a byword for impossibility and despair. But nobody has told Gazans. I found them full of hope.